Real Estate & Property Law

To Foreclose or Not to Foreclose an HOA Property - That is the Question

To foreclose or not to foreclose, that is the burning question these days for HOA and Condo Association boards. Moving in the direction of foreclosure used to be the way to get owners to pay delinquent assessments. I say "used to be" because people used to have equity in their homes, and the threat of foreclosure was a real threat.

To pay or not to pay the delinquent assessment is the burning question these days for owners. It used to be a no-brainer. If the HOA or Condo Association could foreclose and force the sale of your home, or take it back for unpaid assessments, the best answer of course was to make arrangements to pay the assessments, whether in a lump sum or on a payment plan (assuming the HOA or Condo board allowed a payment plan).

It used to be - should I say in the "olden days" - pre "recession", that boards could accept payment plans because a small percentage of the owners were delinquent.

It used to be that boards would move toward foreclosure in all but a few situations to collect assessments. That was "pre-recession". Now many HOA and Condo boards are looking at ways to pursue the debt of delinquent assessments against the individual owner(s) during whose ownership the delinquency accrued (yes, that is usually an option available to HOAs, but many, many people do not know that!).

Boy, the "olden days" are gone. The "steel hammer" in the threat of an HOA foreclosure is all but turned to a weak rubber mallet. The desire to stay current with delinquent assessments has all but turned into the sands of time, slipping through the grasp of the average American. Owners who think they are "in the clear" for a delinquency when the bank forecloses are getting unwelcome surprises when served with a subpena for a personal debt action. Short sales are falling apart at the last minute because the parties (seller, buyer and lender) are ignoring the HOA and the accrued assessment debt until it can no longer be ignored - which is the case when a valid HOA lien shows up on the title search.

The collection of delinquent assessments has become an elusive effort in futility in many cases. And for that reason, many HOA and Condo Association boards have stopped offering payment plans. The reality is that the association bills need to be paid ... and in many cases, the income from assessments has dropped dramatically. Associations that used to run with 1% or less in deliqencies are in many cases running with 10% or more today!

What is the answer?

Pray for better times and an economic upturn.
Pray for an improvement in the housing market to where it makes sense to keep one's property.
Pray for help in balancing a precarious budget.
Pray for the well-being of everyone .. And I do mean everyone ... The better off everyone is, the more likely the economy is to start a serious upturn.

And if you are not a religious person, then GET EDUCATED about the facts, options and solutions.

You can find many answers and get help in working out solutions in the various 5 Assessment Primers that are available on my website. Since each is about 20 pages long, and detailed to the max about the specific subject matter, it would be absurd to try and summarize the information in one blog or one article. The information is there for the taking, for a very small price ($25 each). Get educated and whether you are on an association board, in hot water over your own finances, or trying to help out a relative, it pays to have the information needed to make wise decisions. Here are the topics: (California law incorporated)

Basic Assessments A-1 - How To Determine How Much Should be Charged
Assessments A-2 - All About HOA Foreclosure
Assessments A-3 - All About Bankruptcy in HOAs
Assessments A-4 - Coping With the Big Special Assessment
Assessments A-5 - Collections in Hard Times
Assessments A-F - Forms Used in Collections and Satisfaction of Disclosure Requirements

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Full post as published by California Condo & HOA Law on August 29, 2009 (boomark / email).